Saudi Arabia Reduces Oil Production to 9 Million bdp to Support Market

Officials, including Saudi Energy Minister Prince Abdulaziz bin Salman (center), at the OPEC+ meeting in Vienna on Sunday. (Twitter)
Officials, including Saudi Energy Minister Prince Abdulaziz bin Salman (center), at the OPEC+ meeting in Vienna on Sunday. (Twitter)
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Saudi Arabia Reduces Oil Production to 9 Million bdp to Support Market

Officials, including Saudi Energy Minister Prince Abdulaziz bin Salman (center), at the OPEC+ meeting in Vienna on Sunday. (Twitter)
Officials, including Saudi Energy Minister Prince Abdulaziz bin Salman (center), at the OPEC+ meeting in Vienna on Sunday. (Twitter)

Saudi Arabia decided to voluntarily reduce its oil production by 1.5 million barrels per day, to the level of 9 million barrels per day, to support oil markets in light of the uncertainty surrounding the global economy.  

An official source in the Saudi Ministry of Energy said on Sunday that the additional voluntary cuts in the Kingdom’s oil production, by one million barrels per day, would take effect as of July and for a month that can be extended.  

During a meeting on Sunday, OPEC+ countries decided to adjust their production level to 40.4 million barrels per day, starting from January 2024 for a period of one year, and agreed to reduce oil production by 3.66 million barrels per day, announced Russian Deputy Prime Minister Alexander Novak.  

The new voluntary cut by Saudi Arabia comes in addition to the OPEC+ agreement. 

The Kingdom described the move as a “precautionary measure”, through which it will extend its voluntary cut of 500,000 barrels per day until the end of December 2024, in coordination with some countries participating in the OPEC+ agreement.  

UAE Minister of Energy Suhail Al Mazrouei immediately announced that his country would extend its voluntary reduction in oil production of 144,000 barrels per day until the end of December 2024.  

“The extension of the voluntary reduction in production comes in coordination with the countries participating in the OPEC+ agreement,” he stated.  

Iraq also announced its commitment to the voluntary cut of its oil production of 211,000 barrels per day. Oman and Algeria also decided to cut their production by 40,000 barrels and 48,000 barrels per day, respectively.  

Following Sunday’s meeting, Novak said his country would extend its voluntary cut in oil production of 500,000 barrels per day until the end of 2024.  

The cuts will be as a precautionary measure, in coordination with the countries participating in the OPEC+ agreement, which had previously announced voluntary cuts in April, he added.  

“This voluntary cut will be from the required production level, as agreed upon at the thirty-fifth ministerial meeting of OPEC+ on June 4, 2023,” Novak stressed.  

He underscored the ability to “adjust our decisions” to stabilize the oil market, referring to economic developments in China.  

“We are closely monitoring China's recovery from the repercussions of the COVID-19 pandemic,” he remarked.  

A press release posted on Sunday on the OPEC website stated that an agreement was reached to hold the OPEC+ ministerial meeting every six months. The next meeting will be held in Vienna on November 26. 

The Joint Ministerial Monitoring Committee was granted the authority to hold additional meetings, or to request a ministerial meeting for the group at any time to meet “market developments whenever necessary.”  



Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).

Saudi Arabia has raised $12 billion from global debt markets in its first international bond issuance of the year, attracting bids worth nearly $37 billion. This demonstrates strong investor appetite for Saudi debt instruments.

The issuance comes just two days after the approval of the 2025 annual borrowing plan by Minister of Finance Mohammed Al-Jadaan. The plan estimates financing needs for the fiscal year at SAR 139 billion ($37 billion). The funds will be used to cover the projected SAR 101 billion ($26.8 billion) budget deficit for 2025, as well as repay SAR 38 billion ($10 billion) in principal debt obligations due this year.

The National Debt Management Center (NDMC) announced on Tuesday that the issuance includes three tranches: $5 billion in three-year bonds, $3 billion in six-year bonds, and $4 billion in ten-year bonds. Total demand for the bonds reached $37 billion, exceeding the issuance size by three times and reflecting robust investor interest.

The NDMC emphasized that this issuance aligns with its strategy to broaden the investor base and efficiently meet Saudi Arabia’s financing needs in global debt markets.

According to IFR, a fixed-income news service, the initial price guidance for the three-year bonds was set at 120 basis points above US Treasury yields. The six-year and ten-year bonds were priced at 130 and 140 basis points above the same benchmark, respectively.

Strong demand allowed Saudi Arabia to lower yields on the shorter-term bonds, further demonstrating investor confidence. Economists noted that the pricing above US Treasuries is attractive in the current market, showcasing trust in Saudi Arabia’s economic stability and financial strategies.

International confidence

Economic experts view this successful bond issuance as a testament to international confidence in Saudi Arabia’s robust economy and financial reforms. Dr. Mohammed Al-Qahtani, an economics professor at King Faisal University, said the move underscores Saudi Arabia’s commitment to diversifying financing tools both domestically and internationally. He added that the funds would support Vision 2030 projects, reduce pressure on domestic resources, and attract strong international investor interest.

The issuance strengthens Saudi Arabia’s ability to meet financial needs, expand its investor base, and establish a global financing network, he said, noting that it also facilitates entry into new markets, enabling the Kingdom to accelerate infrastructure projects and capital expenditures.

Dr. Ihsan Buhulaiga, founder of Joatha Business Development Consultants, described the 2025 budget as expansionary, aimed at meeting the financing needs of economic diversification programs. He stressed that the budget deficit is an “optional” one, reflecting a deliberate choice to prioritize Vision 2030 initiatives over immediate fiscal balance.

Buhulaiga explained that the Kingdom’s approach balances two options: limiting spending to available revenues, which would avoid deficits but delay Vision 2030 initiatives, or borrowing strategically to fund Vision 2030 goals. He said that the annual budget is just a component of the larger vision, which requires sustained funding until 2030.

He continued that Saudi Arabia’s fiscal space and creditworthiness allow it to borrow internationally at competitive rates, explaining that this flexibility ensures financial sustainability without compromising stability, even during challenges like the COVID-19 pandemic.

Saudi Arabia’s debt portfolio remains balanced, with two-thirds of its debt domestic and one-third external. As of Q3 2024, public debt stood at approximately SAR 1.2 trillion, below the 30% GDP ceiling. According to the Ministry of Finance, the budget deficit is expected to persist through 2027 but remain below 3% of GDP.

Buhulaiga highlighted the importance of capital expenditure, which reached SAR 186 billion in 2023 and is projected to rise to SAR 198 billion in 2024, a 6.5% increase.

He emphasized the government’s pivotal role in economic diversification, supported by investments from the Public Investment Fund (PIF), the National Development Fund, and its subsidiaries, including the Infrastructure Fund.

The PIF recently announced a $7 billion Murabaha credit facility, facilitated by Citigroup, Goldman Sachs International, and JPMorgan. Meanwhile, the NDMC arranged a $2.5 billion revolving credit facility earlier in January, compliant with Islamic principles, to address budgetary needs.

In November, Moody’s upgraded Saudi Arabia’s credit rating to Aa3, aligning with Fitch’s A+ rating, both with a stable outlook. S&P Global assigns the Kingdom an AA-1 rating with a positive outlook, reflecting a high ability to meet financial obligations with low credit risk.

The IMF estimates Saudi Arabia’s public debt-to-GDP ratio at 26.2% in 2024, describing it as low and sustainable. This is projected to rise to 35% by 2029 as foreign borrowing continues to play a key role in financing deficits.